Over the past few months, retailers across the country have been battling a growing threat.
Earlier this year, President Donald Trump announced sweeping tariffs (taxes companies pay to import goods from overseas) on multiple countries to encourage more manufacturing in the U.S., which may cause companies to raise prices for everyday goods.
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“The higher the tariff, the more likely it is that the company will come into the United States and build a factory,” said Trump in an interview with Bloomberg News in October.
In April, he announced a 10% baseline tariff on nearly all U.S. imports, and by Aug. 7, higher tariffs went into effect, impacting dozens of the country’s trade partners.
As the president’s tariff policy has unfolded over the last few months, Target (TGT) and many other large retailers have been sounding the alarm about the potential domino effect this policy could have on their businesses.
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During an earnings call in May, Target CEO Brian Cornell warned that tariffs could cause the company to face “massive potential costs.”
He said that Target has been working “tirelessly” to mitigate the impact of tariffs, and the difficulty level has been “incredibly high” due to the magnitude of Trump’s tariff rates.
“As a company that aims to deliver great products and outstanding value, we’re focused on supporting American families as they manage their budgets,” said Cornell. “We have many levers to use in mitigating the impact of tariffs, and price is the very last resort.”
Target might need to make a harsh change in stores to navigate tariffs
Amid Target’s tariff battle, Bank of America analysts predict that the retail giant may soon have to make a startling change in its stores.
According to a recent analyst note obtained by MarketWatch, BofA analysts state that because of its high import exposure, Target will need to increase its prices to twice the rate of Walmart (WMT) , its top rival, to weather the impact of tariffs.
Specifically, analysts estimate that Target would need to hike its prices by roughly 8% on average to fully offset tariffs in fiscal year 2027, compared to the potential 4% to 5% price increase needed for Walmart.
This is only if Target’s sales volume and other costs stay flat, and it takes no other initiatives to mitigate the impact of tariffs.
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“Recent merchandising leadership and partnership changes (including Ulta Beauty) could exacerbate risks in the current dynamic and challenging sourcing environment,” said BofA analysts in the note.
In May, Target Chief Commercial Officer Rick Gomez said during an earnings call that the company is in “a good position” to handle the impact of tariffs due to its multi-category business and the “productive partnerships” it has built with vendors and suppliers.
“The strategies that the teams are employing as we speak include diversifying the country of production,” said Gomez. “Half of what we sell comes from the US. But beyond that, we have the most control of where we produce when it comes to our own brands. And with our own brands, we have been on a multiyear journey to diversify countries of production.”
He also said that the company is looking to evolve its product assortment, which will help lessen the blow of tariffs.
Higher prices may spell trouble for Target
The last thing Target needs is higher prices in its stores, which could scare away price-conscious shoppers.
In the first quarter of 2025, Target’s comparable sales declined by 3.8% year-over-year. Also, according to recent data from Placer.ai, the number of customers visiting Target stores per location dropped by 4.8% year-over-year during the quarter.
The decline in sales comes after Target suffered multiple consumer boycotts over its decision to scale back its diversity, equity, and inclusion policies earlier this year.
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Consumers nationwide have also been cutting back their discretionary spending due to concerns about Trump’s tariffs.
According to a recent survey from market research company Numerator, 87% of consumers are worried about tariffs impacting their finances.
Also, 80% of consumers are adjusting their finances or shopping habits in response to tariffs, including delaying nonessential or expensive purchases, buying fewer imported goods, searching for sales and coupons, and switching to shopping at lower-priced retailers and discount stores.
Amid recent challenges, Target revealed in its second-quarter earnings report for 2025 that it expects a low-single-digit decline in sales for the entire year.
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